Franchising must be in his blood: Vancouver entrepreneur Brian Scudamore took an idea to start a company in junk removal and built it into a $100million...

You wanna be a successful Internet entrepreneur?

Here's a key piece of advice - hit the ground running, at full speed.

Here's another - Canadian entrepreneurs need to up their game.

"My rule of thumb is that for every startup that we have in (Vancouver) there are probably five to 10 other startups working on a similar idea in a different region. Only the fastest and the strongest are going to survive," said Boris Wertz, British Columbia's leading angel investor.

"There is so much innovation these days. There are so many startups being created - if you're not one of the first ones, and the perceived category leader, it's going to be tough to build a big business."

Wertz was a senior executive at AbeBooks when it sold to Amazon for a rumoured $100 million. Now he invests in people he believes have the intelligence and skill to succeed in what has become a global competition for online and digital content consumers.

He has money in 25 early-stage consumer Internet ventures including Unbounce, Indochino and GrowLab, and he belongs to C100 - a group of Canadians who serve as mentors to a new generation of Canadian entrepreneurs.

Members include high-profile venture capitalists in California's Silicon Valley as well as senior executives with computer technology giants including Apple, Google, Facebook, Cisco, EA and Microsoft.

Earlier this year Wertz co-founded GrowLab, the Vancouver high-tech business accelerator program that recently celebrated the graduation of its first cohort of five Internet and mobile technology companies. Over the next five years, he anticipates GrowLab will support the development of 50 tech companies and become self-sustaining.

"Your only chance is to invest in as many companies as you can, given a certain base quality - and be selective about that. (In five years) the first 10 or 20 might be ready sell, and bring back money into Grow-Lab and it becomes a self-sufficient operation where we can live off the excess proceeds that we get from earlier companies."

While he's a "big supporter" of Vancouver's tech community, Wertz says that to accelerate development, the city needs to attract more - and better - entrepreneurs.

Senia Rapisarda, the vice-president for strategic initiatives and investments at Business Development Bank of Canada, shares that sentiment.

Rapisarda said that while Canadians have the technology and skill to compete in the high-tech market they are "a bit behind" when it comes to fostering development of what she described as "serial entrepreneurs."

"Doing something, being successful and coming back for more, or doing something, failing, and coming back for more. We don't have a lot of those, and we need them."

Of five companies that were selected for GrowLab and for subsequent $150,000 funding from BDC, three had Canadian executive teams and the other two were from the United States and Romania.

Rapisarda said she's more concerned about losing homegrown talent to Silicon Valley than about the optics of using BDC funds to attract entrepreneurs to Canada.

"This is exactly what we want to do at the end of the day - attract talent and build wealth in Canada. I don't care where they come from as long as they stay," she said.

"My problem is how to stop four brilliant engineers trained in Waterloo that start a company and decide immediately to go south because nobody is going to finance them here."

The number of venture capital funds in Canada has grown from six in 1974 to about 75 in 2011.

In 2000, a "bubble time" before the dot-com meltdown, venture capitalists invested $5.9 billion across the country for high-tech, biotech and clean technology. Last year, those sectors attracted about $1.1 billion.

"If you look at it regionally, every province was hit pretty well equally," Remillard said.

"There is no hard and fast number I can point to and say demand (for capital) is really going up - but if you step behind that, how much bigger today is the Canadian economy than it was 10 years ago? Fifty per cent?"

One of the biggest obstacles to growth is lack of investor confidence, he said.

"You put up to $30 million or $40 million into the company over the course of seven, eight, nine years - that's how long you hold them - and at some point in time you've got a company that's nicely robust and ready to be launched in the public market.

Market evaporates

"But the IPO or initial public offering market has just evaporated over the past couple of years. As a result, our funds and funds in the U.S., in Canada, in British Columbia and in other places are sitting on fairly mature companies that in a normal environment would end up on a public (stock) market and off you go.

"If you look at the numbers, in 2008 there was one IPO of a venturebacked company in Canada. There was one in 2009, one in 2010, and two year-to-date in 2011.

"The industry is funding at the current rate 400 to 600 companies a year. We were funding even more companies before the cash crunch really started to bite - and you've got one to two opportunities to launch the company on the public market."

By contrast, about 30 to 35 Canadian venture-backed companies are sold off each year to big tech giants such as Cisco, Google, Microsoft and Intel - "and a lot of them are sitting on substantial cash hoards and they're sniffing around looking to buy up companies," Remillard said.

The "preferred path," he added, is an IPO because that's where the market, as opposed to one wealthy buyer, determines the price that the company can fetch and thus, the return on investment that a venture capitalist would receive.

Infusion from U.S.

Brent Holliday of Capital West Partners, a Vancouver corporate advisory firm that assists venturescale companies, says roughly 35 per cent of capital invested in Canadian companies comes from firms in the United States.

"The theory is, if you have great innovation and great people, capital will follow. That's borne out by U.S. investment in Canadian technology companies over the years," Holliday said.

"The question then is, how do you get that capital into your company? It's the same story as it is anywhere - you've got to have a great innovation, something unique, and ultimately a team or the beginnings of a team that these guys are going to want to back."

Then there's an additional challenge - the lack of a Silicon Valley zip code.

"They assume that Vancouver is the same as Raleigh, North Carolina, or Huntsville, Alabama, or Cleveland - so there's probably a pocket of good tech guys, but it's not a tech centre," Holliday said.

"The efforts of GrowLab, and Boris, are fantastic because they are taking our talent and our innovation and plopping them right down in front of all the key guys and saying, 'See what we've got.' "

Katherine Barr, a partner at Silicon Valley venture capital giant Mohr Davidow, was a founding member of the C100 group.

"I have found that a lot of the Canadian tech entrepreneurs tend to be very conservative in the way that they look at the world, and the opportunity. I think part of that is just not being surrounded by the same mindset (as) in Silicon Valley. There are fewer resources there to encourage them and show them what is possible. It's a different ecosystem here," says the native of Perth, Ont.

"I come down to Silicon Valley and the world completely opens up - versus all of the reasons why we can't do it."

Think bigger

Barr says she encourages Canadian entrepreneurs to find ways to differentiate themselves from the 50 other companies doing similar things, and also to think bigger - to get them out of the mindset of thinking that $5 million in revenue three years from now is a sign of success, or that expanding means widening a market from British Columbia to Nova Scotia.

Last year at iNovia Capital, a small Canadian venture fund, about 500 deals "crossed the desk" and there will be about the same in 2011, said managing partner Chris Arsenault. Big U.S. firms such as Accel and Kleiner Perkins probably see 10 times as many, he said.

The business climate in Silicon Valley, Arsenault said, is so robust that rival firms share deals with an expectation that such favours will be reciprocated in future.

"Those relationships are going to help you with another deal. Then that's going to help you with a coinvestor. It's a phenomenon that's building out your ecosystem, in a way.

"In Canada we still have this underlying feeling that our competitor is the guy across the street or the Quebec competitor is the guy in Ontario, and the Vancouver competitor is the guy from Alberta," Arsenault said.

He thinks co-operation among companies and among rival venture capitalists - in essence, a group effort - would deepen Canada's footprint in the high-tech sector, as would a sense of urgency.

"You have competition coming from India, from China, from everywhere. You don't build a product behind closed doors for six to 12 months before talking with your customers, adapting your product for another six months and launching 18 months later and hoping for your revision three or six months later if you failed on a few features or product specs," he said.

"Right now you are seeing product come out with multiple upgrades and mini-updates, iterations, on a constant basis. So you start using the product and by the time your team is using the product, the product has already evolved.

Change comes quickly

"There's an urgency, with the pace of change so fast, you risk falling behind.

"I think the only way you feel comfortable in that environment is by opening up, sharing concerns or challenges - so you don't see that sharing as a threat, but as an opportunity for somebody to help you get it out faster. You'll have a better product because of it."

We don't need to be Silicon Valley but we need to have the same energy said Debbie Landa, a GrowLab cofounder and C100 member.

Landa runs a company called Dealmaker Media that organizes conferences in California and Vancouver where venture capitalists and hightech companies can network.

"I don't like the fact that people want to have this caveat when it comes to Canadian companies. With the right coaching, the right mentorship and the right little push you can get them on par with everyone else.

"Vancouver is a very relaxed place, which is a problem. If people here (Vancouver) aren't at the top of their game, or they're just sort of in the middle, or there's only a couple of guys at the top of their game, there's not a lot of competition around you. So you look pretty good, just being OK.

"My expectation is always that you need to be at the very top of your game if you want to win. I want to light a fire under those people, I want to show them what being aggressive, what running a company, what going after a big idea really looks like."

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